Baking/cake decorating is a new hobby for me that I greatly enjoy. Recently I have had a few people ask me to make cakes for various occassions after they have seen some of my work. I am not sure how to set the prices. I have charged $10 for 4"X 8" round and $20 for 4" x 12" round. I generally cover the cakes in buttercream and use royal icing, fondant, or color flow pieces for decoration. All icings and cakes are made from scratch. I live in PA, USA. Any suggestions for pricing would be greatly appreciated. Also, should fondant covered cakes be priced much higher? Thank you in advance.

You need to determine your total cost of materials for the cake first. I'm sure the $10 your charging barely covers everything when you consider not just the ingredients, but the cake boards, wrap, electricity used etc. Then there are the misc. things such as cleaning supplies, items used that are so incremental you can't break it down, ie 1 tsp vanilla etc..... This is the formula I use:
Total cost of materials ( all materials )
add to this 2% of the above total cost
Multiply the total of the above by 4 ( some people use 3 ). If you are doing a lot of piece work, such as gumpaste roses etc then that is priced out separately such as $.50 per rose as an example.
The end total is your price.
In order to see if you are in line with your areas' pricing, call a few bakeries and the groceries stores. Try to price yourself mid to high range as you are scratch ( groceries stores aren't ) and you don't want to undercut the competition.

Thank you for the information. I did the calculations which revealed that I should be charging $22 for a 4" x 8" cake WITHOUT decoration. I did not add in the 2% and did the x3 rather than x4. Wow! Does this seem high to you? I know our grocery store sells the same size cake decorated for only $13. I need to check out some local bakeries. Thanks again.